"It has condemned people to death," the former apparatchik told me. This was like a scene out of Le Carre. The brilliant
old agent comes in from the cold, crosses to our side, and in hours of debriefing, empties his memory of horrors committed
in the name of a political ideology he now realizes has gone rotten.
And here before me was a far bigger catch than
some used Cold War spy. Joseph Stiglitz
was Chief Economist of the World Bank.
To a great extent, the new world economic order was his theory come to life.
I "debriefed" Stigltiz over several days,
at Cambridge University, in a London hotel and finally in Washington in April 2001 during the big confab of the World Bank
and the International Monetary Fund. But instead of chairing the meetings of ministers and central bankers, Stiglitz was kept
exiled safely behind the blue police cordons, the same as the nuns carrying a large wooden cross, the Bolivian union leaders,
the parents of AIDS victims and the other ‘anti-globalization’ protesters. The ultimate insider was now on the
In 1999 the World
Bank fired Stiglitz. He was not
allowed quiet retirement; US Treasury Secretary Larry Summers, I’m told, demanded a public excommunication for Stiglitz’
having expressed his first mild dissent from globalization World Bank style.
Here in Washington we completed the last
of several hours of exclusive interviews for The Observer and BBC TV’s Newsnight about the real, often hidden, workings
of the IMF, World Bank, and the bank’s
51% owner, the US Treasury.
here, from sources unnamable (not Stiglitz), we obtained a cache of documents marked, "confidential," "restricted," and "not
otherwise (to be) disclosed without World Bank authorization."
Stiglitz helped translate one from bureaucratise, a
"Country Assistance Strategy." There’s an Assistance Strategy for every poorer nation, designed, says the World Bank,
after careful in-country investigation. But according to insider Stiglitz, the Bank’s staff ‘investigation’
consists of close inspection of a nation’s 5-star hotels. It concludes with the Bank staff meeting some begging, busted
finance minister who is handed a ‘restructuring agreement’ pre-drafted for his ‘voluntary’ signature
(I have a selection of these).
Each nation’s economy is individually analyzed, then, says Stiglitz, the Bank
hands every minister the same exact four-step program.
Step One is Privatization - which Stiglitz said could more accurately be called, ‘Briberization.’ Rather than object to the sell-offs
of state industries, he said national leaders - using the World Bank’s demands to silence local critics - happily flogged
their electricity and water companies. "You could see their eyes widen" at the prospect of 10% commissions paid to Swiss bank
accounts for simply shaving a few billion off the sale price of national assets.
And the US government knew it, charges
Stiglitz, at least in the case of the biggest ‘briberization’ of all, the 1995 Russian sell-off. "The US Treasury
view was this was great as we wanted Yeltsin re-elected. We don’t care if it’s a corrupt election. We want the
money to go to Yeltzin" via kick-backs for his campaign.
Stiglitz is no conspiracy nutter ranting about Black Helicopters.
The man was inside the game, a member of Bill Clinton’s cabinet as Chairman of the President’s council of economic
Most ill-making for Stiglitz is that the US-backed oligarchs stripped Russia’s industrial assets,
with the effect that the corruption scheme cut national output nearly in half causing depression and starvation.
briberization, Step Two of the IMF/World Bank one-size-fits-all rescue-your-economy plan is ‘Capital Market Liberalization.’ In theory, capital market deregulation allows investment capital
to flow in and out. Unfortunately, as in Indonesia and Brazil, the money simply flowed out and out. Stiglitz calls this the
"Hot Money" cycle. Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A
nation’s reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation’s
own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%.
"The result was predictable,"
said Stiglitz of the Hot Money tidal waves in Asia and Latin America. Higher interest rates demolished property values, savaged
industrial production and drained national treasuries.
At this point, the IMF drags the gasping nation to Step Three:
Market-Based Pricing, a fancy term for raising prices on food, water
and cooking gas. This leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, ‘The IMF riot.’
IMF riot is painfully predictable. When a nation is, "down and out, [the IMF] takes advantage and squeezes the last pound
of blood out of them. They turn up the heat until, finally, the whole cauldron blows up," as when the IMF eliminated food
and fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into riots, but there are other examples - the Bolivian
riots over water prices last year and this February, the riots in Ecuador over the rise in cooking gas prices imposed by the
World Bank. You’d almost get the impression that the riot is written into the plan.
And it is. What Stiglitz
did not know is that, while in the States, BBC and The Observer obtained several documents from inside the World Bank, stamped
over with those pesky warnings, "confidential," "restricted," "not to be disclosed." Let’s get back to one: the "Interim
Country Assistance Strategy" for Ecuador, in it the Bank several times states - with cold accuracy - that they expected their
plans to spark, "social unrest," to use their bureaucratic term for a nation in flames.
That’s not surprising.
The secret report notes that the plan to make the US dollar Ecuador’s currency has pushed 51% of the population below
the poverty line. The World Bank "Assistance" plan simply calls for facing down civil strife and suffering with, "political
resolve" - and still higher prices.
The IMF riots (and by riots I mean peaceful demonstrations dispersed by bullets,
tanks and teargas) cause new panicked flights of capital and government bankruptcies. This economic arson has it’s bright
side - for foreign corporations, who can then pick off remaining assets, such as the odd mining concession or port, at fire
Stiglitz notes that the IMF and World Bank are not heartless adherents to market economics. At the same
time the IMF stopped Indonesia ‘subsidizing’ food purchases, "when the banks need a bail-out, intervention (in
the market) is welcome." The IMF scrounged up tens of billions of dollars to save Indonesia’s financiers and, by extension,
the US and European banks from which they had borrowed.
A pattern emerges. There are lots of losers in this system but one clear winner: the Western banks
and US Treasury, making the big bucks off this crazy new international capital churn. Stiglitz told me about his unhappy meeting, early in his World Bank tenure,
with Ethopia’s new president in the nation’s first democratic election. The World Bank and IMF had ordered Ethiopia
to divert aid money to its reserve account at the US Treasury, which pays a pitiful 4% return, while the nation borrowed US
dollars at 12% to feed its population. The new president begged Stiglitz to let him use the aid money to rebuild the nation.
But no, the loot went straight off to the US Treasury’s vault in Washington.
Now we arrive at Step Four of what the IMF and World Bank call their "poverty reduction strategy": Free Trade. This is free trade by the rules of the World Trade Organization and World
Bank, Stiglitz the insider likens free trade WTO-style to the Opium Wars. "That too was about opening markets," he said. As
in the 19th century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin American and Africa,
while barricading our own markets against Third World agriculture.
In the Opium Wars, the West used military blockades
to force open markets for their unbalanced trade. Today, the World Bank can order a financial blockade just as effective -
and sometimes just as deadly.
Stiglitz is particularly emotional over the WTO’s intellectual property rights
treaty (it goes by the acronym TRIPS, more on that in the next chapters). It is here, says the economist, that the new global
order has "condemned people to death" by imposing impossible tariffs and tributes to pay to pharmaceutical companies for branded
medicines. "They don’t care," said the professor of the corporations and bank loans he worked with, "if people live
By the way, don’t be confused by the mix in this discussion of the IMF, World Bank and WTO. They are interchangeable masks of a single
governance system. They have locked
themselves together by what are unpleasantly called, "triggers." Taking a World Bank loan for a school ‘triggers’
a requirement to accept every ‘conditionality’ - they average 111 per nation - laid down by both the World Bank
and IMF. In fact, said Stiglitz the IMF requires nations to accept trade policies more punitive than the official WTO rules.
greatest concern is that World Bank plans, devised in secrecy and driven by an absolutist ideology, are never open for discourse
or dissent. Despite the West’s push for elections throughout the developing world, the so-called Poverty Reduction Programs
And they don’t work. Black Africa’s productivity under the guiding hand of IMF
structural "assistance" has gone to hell in a handbag. Did any nation avoid this fate? Yes, said Stiglitz, identifying Botswana.
Their trick? "They told the IMF to go packing."
So then I turned on Stiglitz. OK, Mr Smart-Guy Professor, how would
you help developing nations? Stiglitz proposed radical land reform, an attack at the heart of "landlordism," on the usurious
rents charged by the propertied oligarchies worldwide, typically 50% of a tenant’s crops. So I had to ask the professor:
as you were top economist at the World Bank, why didn’t the Bank follow your advice?
"If you challenge [land
ownership], that would be a change in the power of the elites. That’s not high on their agenda." Apparently not.
what drove him to put his job on the line was the failure of the banks and US Treasury to change course when confronted with
the crises - failures and suffering perpetrated by their four-step monetarist mambo. Every time their free market solutions
failed, the IMF simply demanded more free market policies.
"It’s a little like the Middle Ages," the insider told me, "When the patient died
they would say, ‘well, he stopped the bloodletting too soon, he still had a little blood in him.’"
I took away from my talks with the professor that the solution to world
poverty and crisis is simple: remove the bloodsuckers.
A version of this was first published as "The IMF’s Four Steps to Damnation" in The Observer (London)
in April and another version in The Big Issue - that’s the magazine that the homeless flog on platforms in the London
Underground. Big Issue offered equal space to the IMF, whose "deputy chief media officer" wrote:
"... I find it impossible
to respond given the depth and breadth of hearsay and misinformation in [Palast’s] report."
Of course it was
difficult for the Deputy Chief to respond. The information (and documents) came from the unhappy lot inside his agency and
the World Bank.